Carbon offsets and carbon farming - what is it all about?

By Krista Schade - January 10, 2024

Carbon farming refers to a set of agricultural practices and land management techniques aimed at reducing greenhouse gas emissions or capturing and storing carbon from the atmosphere.

In Australia, it involves various methods designed to sequester carbon or reduce emissions in agricultural and land-use activities. This includes practices such as reforestation, revegetation, improved grazing and cropping techniques, as well as conservation and sustainable land management approaches.

So what does offsetting carbon actually mean and what is a carbon credit?

According to Greening Australia offsetting carbon means undertaking an activity which reduces emissions to compensate for emissions made elsewhere.

The market for carbon offsetting is made up of both compliance and voluntary demand. Compliance demand is where companies or other entities must offset some carbon in order to comply with caps on the total amount of carbon dioxide they are legally allowed to emit.

The voluntary market is where individuals and companies purchase offsets to compensate for their own greenhouse gas emissions, without being legally obliged to do so.

A carbon credit represents one tonne of carbon dioxide that has been removed from the atmosphere. So if a company had 1,000 tonnes of carbon they needed to offset, they would purchase 1,000 carbon credits.

How are carbon offsets measured?

There is a government FullCAM model which allows the market to calculate how much carbon has been sequestered from carbon offsetting projects. Figures from the project are input into the model (i.e. where, how many trees and in what configurations), which uses a formula to calculate how much carbon will be removed from the atmosphere over a 25-year period.

Credits are only awarded to us by the Australian Government for growth as it occurs (since the last report on growth). If the trees are lost, or damaged by fire, no additional credits are generated.

What is the carbon market?

The carbon market relates to the production and buying and selling of Australian carbon credit units (ACCUs). These units (or credits) are generated primarily from land restoration projects that re-establish native vegetation in the landscape and in turn remove carbon dioxide from the atmosphere. Carbon credits are a financial product that are regulated and issued by the Australian Government to project developers.

What will environmental markets look like in 2030?

Greening Australia expects to see an increase of regulated environmental credit markets to emerge, including water quality credits and biodiversity credits in addition to carbon credits. This will involve similar processes such credit creation, audit, purchase and sale as per the current growing carbon market.

“We expect clearer visibility on the environmental outcomes for investors in environmental markets including quantifiable improvements in quality of the soil and water the carbon sequestered from the atmosphere and ultimately the large-scale restoration of natural landscapes,” a spokesperson said.

Who buys and sells the credits?

Those buying and selling environmental credits will be industry, government, private investors, philanthropist, superannuation funds along with environmental project developers and traders.

The Clean Energy Regulator is the government body responsible for administering the Emissions Reduction Fund and the legislation around reducing carbon emissions.

The Clean Energy Regulator website has some excellent tools and information to help landholders determine the most appropriate carbon method.